A Quick Turnaround Story: The Cleveland Indians

The Cleveland Indians were one of baseball’s biggestsurprises through late May, using a strong
offense, decent starting pitching, and a good bullpen to record a 26-17
record at the 43-game mark of the season.

Although Cleveland has struggled since – the Indians have
gone 6-16 over the past 22 games, mostly due to their offense slowing
down –, the team’s season has still been fairly successful for a team with modest
expectations coming into the season.

Much of the Indians’ success is due in large part to shrewd
moves made in the offseason, mitigating the loss of Shin-Soo Choo by
acquiring Nick Swisher, Michael Bourn, and Mark Reynolds via free agency and
Drew Stubbs and a few solid bullpen arms via trade.

The cost-benefit analysis and marginal upgrades behind the
acquisitions of Swisher and Bourn, upon reflection, deserve particular praise.

“Having it all”: Weighing
future vs. present value

Swisher and Bourn were both tendered qualifying offers by
the Yankees and Braves respectively over the past off-season – thus, any team
that signed either free agent would have to surrender its highest pick in the
2013 Draft under the current CBA (this should resonate with Nationals fans,
given Rafael Soriano’s presence).

However, teams with a top-10 first-round pick are protected
from surrendering their “lottery” pick; those teams instead surrender their
ensuing picks when signing tendered free agents. In Cleveland’s case, the team
gave up its second-round pick for Nick Swisher (rather than its first-round
pick) and second-round competitive balance pick for Michael Bourn (rather than
its second-round pick).

Victor Wang and Sky Andrecheck – both current members of the
Indians’ front office – did research a long time ago on compensation
pick values that adjudged Cleveland’s first-round pick to have at
least ~$5.2M surplus present value and second-round picks to each have around
~$0.8M surplus PV. (For Indians’ No. 5 pick Clint Frazier, I calculated a very back-of-envelope surplus PV of
~$17M, given lifetime 10 WAR, assumption
that 50% of win shares were roughly earned during cost-controlled years,
and slot signing – given Frazier will be a BA Top 100 hitter when he signs, the
rough number is generally grounded.)

Note: These values are
dated to the time the research was published (and the vintages of players
analyzed may provide different numbers now), so these values: 1) are
guidelines, and 2) have presumably inflated.

Assuming that Swisher and Bourn are signed to open-market
contracts (at quick glance they appear to be paid as such, and the Indians’ FO
is smart enough to pay linearly
per WAR), Cleveland extracts no surplus present value from either Swisher’s
or Bourn’s contracts.

Cleveland was 65-91 last season, but made solid acquisitions
(replacing Choo with Stubbs – plus prospect Trevor Bauer, unorthodox training
methods aside –, and adding Mark Reynolds and various bullpen arms) aside from
the Swisher and Bourn signings that slightly improved the team. Making the
assumption that Cleveland would be a 65-70-win team without Swisher and Bourn,
it’s safe to say that the two free agent additions make the Indians a near-.500
club and provide nearly $10 million surplus present value through their play this season
(despite their open-market contracts).

If
the Indians had to relinquish its first-round pick to
sign either free agent, the acquisitions of Swisher and Bourn probably
wouldn’t
have been worth it from a cost-benefit perspective. The team would be
giving up
almost $20M+ surplus present value (through the drafted prospects) for
the $10M surplus PV the two free agent signings provide helping the team
win in the present.

By exploiting the protection mechanism provided by the CBA,
however, the Indians both protected its future (by keeping their first-round
pick) and improved its present, gaining a net $8M surplus present value from signing
Swisher and Bourn and relinquishing the two second-round picks. The
preservation of the first-round pick over the second-round competitive balance
pick alone provides an additional $16M surplus PV swing, which makes Cleveland’s
off-season decisions even more illuminating.

This example naturally
compels me to think about the Rafael Soriano signing and how the numbers net
for the Nationals. Given the prospect values of a late-1st round pick,
and the assumptions that the net gain from Soriano is +2-3 WAR and marginal
value of a WAS win is $1.2M, Washington comes out slightly behind for giving up
the draft pick. However, the marginal value for a curly W is probably higher
than $1.2M given the team’s ambitions this year, so the signing could probably
be perceived both ways.